How I got rid of my last bad investment property

I bought a house in Malvern for about R275 000 at the sheriff's auction in 2010. I paid cash, then raised a bond for R300 000. The property pulled in R14 000 a month so everything was going swimmingly. Then, in 2013 it was hijacked.

The highjacker had started running a creche at the house and was making a killing, so when I got an eviction order, he agreed to pay rental. That lasted for a while, then he stopped paying again. Meantime the creche was using an enormous amount of water and he didn't pay me for the municipal charges. 

It was no use evicting the guy because he would just break back in and carry on as before and with the "street committee" backing him up, so how was I going to deal with this?

I stopped paying the bond and waited for the bank to wake up and start legal process. I also stopped paying the Municipality and stalled them every time they called (which was very rarely). It took the bank about a year to wake up, but eventually in April this year they issued a summons. Now we're playing! We didn't oppose and judgement was granted in May. All good so far. I had to keep stalling the CoJ, whose account was now R160 000. The property went on sheriff's auction in September and raised R360 000. By then the bond, with costs was R345 000. The buyer has to pick up the tab for the last two years' municipal charges (this has always been the case at sheriff's auctions). So it looks as if I've come out clean.

The matter is not yet finalised as the buyer has to pay the remaining 90% of the bid price, but these regulars have plenty of cash, so I'm confident on that score. Phew!

What was the biggest mistake I'd made? I bought all the sheriff auction properties in the same company. One of them was the building that now houses my school and my offices (although I originally bought it to rent out), so when the Malvern property went sour, my office building was at risk. It is important to separate risk, so when structuring ownership, be aware that with several investments or businesses in any one company, if one goes, they all go.

Accreditations & Memberships

South African Institute of Chartered Accountants. Designation CA(SA) Engineering Council of South Africa. Designation Pr(Eng)Independent Regulatory Board for Auditors. Designation RA<    Internationally Accredited Financial MediatorsMember of MENSA, the High IQ Society

 

 

 

Contact Details

Minentle : mini@harbourassociates.co.za

Tumi : tumi@harbourassociates.co.za

Derek : derek@harbourassociates.co.za

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Outside office hours (any day, any time): 083 385 0791

Skype: derek.peter.springett

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